CORPORATIONS
32. Debt to equity ratio in financial corporations
• After a sharp peak in the debt-to-equity ratio of financial
corporations in 2008 in most OECD countries, a significant fall
of -1.6 point on average was recorded in 2009, followed by
another decline in 2010 although to a much lesser extent,
indicating a decrease in the risk exposure for the creditors of the
financial corporations.
• Between 2006 and 2011, debt-to-equity ratios increased in
22 out of 30 OECD countries. The strongest increases were
recorded in Greece (28.0 points), Italy (10.2 points) and Belgium
(5.5 points). Since 2006, Luxembourg’s ratio has remained
below 1, the lowest ratio of OECD countries.
Firms can finance their operations through debt or equity.
The debt to equity ratio is a measure of the financial lever-
age, or the degree to which financial companies finance
their activities out of their equity. The more debt financing a
firm uses, the higher its financial leverage which in turn
means higher interest payments and the greater the risk for
corporations creditors and investors; therefore, high corpo-
rate leverage increases the vulnerability of financial corpora-
tions to shocks and may impair their repayment capacity.
A higher total debt-to-equity ratio indicates that the sector
has been increasing the relative share of debt in external
financing, whereas a lower debt-to-equity ratio indicates
that the sector is financing a decreasing proportion of its
activities through debt as compared to financing through
their equity (retained earnings and net new share issuance).
Fluctuations in the market value of equity can also cause
changes in the ratio. The ratio is the number of times debt
is to equity. Therefore, if a financial corporation’s ratio
is 2.5 it means that the debt outstanding is 2.5 times larger
than their equity.
Higher debt can result in volatile earnings due to additional
interest expense as well as increased vulnerability to
business downturns. However, contrary to what many
believe, debt is not necessarily a bad thing: it can be
positive, provided it is used for productive purposes such as
purchasing assets and improving processes to increase net
profits. Moreover, the debt-to-equity ratio is more
meaningful when compared over a period of time.
Non-consolidated debt data provide important information
about the total indebtedness of the financial corporations
sector.
110
Definition
The debt to equity ratio indicator is calculated by
dividing the debt of financial corporations by the total
amount of shares and other equity liabilities of the
same sector.
Debt is a commonly used concept, defined as a specific
subset of liabilities. All debt instruments are liabilities,
but some liabilities such as shares, equity and financial
derivatives are not debt. Debt is predominantly
obtained as the sum of the following liability catego-
ries: currency and deposits, securities other than
shares (except financial derivatives), loans, insurance
technical reserves and other accounts payable.
On the denominator side, shares and other equity
correspond to a part of the own resources of financial
corporations which are, by convention, reported on
the liability side of the companies. Own funds, which
are calculated as total net worth plus shares and
other equity, would have been preferable as a denom-
inator to avoid stock market fluctuations. However
due to the non-availability of data on non-financial
assets for many OECD countries, the total net worth
could not be calculated. In this respect, shares and
other equity, which form a part of own funds, are
selected as a denominator.
The financial corporation sector (S12) includes all
private and public entities engaged in financial
activities, such as monetary institutions (including
the central bank), financial intermediaries, insurance
companies and pension funds.
Comparability
Data are non-consolidated for all OECD countries, except
for Australia and Israel. According to SNA standards, a
consolidated set of balance sheets for a sector is, first, an
aggregation of all stocks, followed by the elimination of all
stocks that represent relationships among units belonging
to the same sector.
Source
OECD (2013), National Accounts of OECD Countries, Financial
Balance Sheets, OECD Publishing, Paris, http://dx.doi.org/
10.1787/22214461 (except for Australia and Israel).
Online database
OECD (2013), “Financial Balance Sheets”, OECD National
Accounts Statistics (database), http://dx.doi.org/10.1787/na-
fbs-data-en.
Information on data for Israel: http://dx.doi.org/10.1787/
888932315602.
NATIONAL ACCOUNTS AT A GLANCE 2014 © OECD 2014
 CORPORATIONS
32. Debt to equity ratio in financial corporations

Table 32.1. Financial corporations debt

Ratio of debt to equity, number of times
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Australia 5.0 4.4 4.1 4.5 4.2 4.0 3.9 3.9 4.1 6.1 5.0 5.1 5.6 5.4
Austria 4.4 4.3 4.6 4.5 4.2 4.0 3.4 3.2 3.2 4.7 3.9 3.5 4.1 3.7
Belgium 2.9 2.8 3.4 4.4 4.4 3.8 3.8 3.4 3.9 8.3 6.5 6.7 8.9 6.7
Canada 2.1 1.6 2.1 2.2 2.0 1.9 1.9 1.8 1.7 2.3 1.9 1.7 1.8 1.7
Chile .. .. .. .. .. .. 10.9 9.4 8.1 7.6 7.2 7.9 8.2 8.9
Czech Republic 10.9 11.3 13.4 15.2 7.5 7.0 7.3 7.4 7.2 8.3 7.3 6.5 7.0 6.2
Denmark .. .. .. .. 4.8 4.5 3.8 3.6 4.3 7.0 5.8 4.5 4.5 4.1
Estonia 4.2 2.6 2.6 2.4 3.0 2.4 2.9 4.5 4.3 4.8 5.2 4.4 4.1 4.0
Finland 4.2 4.3 4.4 4.6 3.7 3.5 2.9 2.5 2.7 4.1 3.6 3.8 5.2 4.9
France 3.3 3.0 3.2 3.5 3.2 3.2 3.0 2.9 3.6 4.8 4.2 4.4 5.4 4.9
Germany 4.5 4.8 5.4 7.0 6.1 6.2 5.5 5.2 5.3 7.6 6.5 6.1 6.4 5.7
Greece 1.5 2.2 3.0 4.1 3.4 3.2 3.1 3.0 3.2 13.0 9.8 19.3 31.0 11.6
Hungary 8.1 7.7 7.1 6.0 5.8 5.2 4.7 4.3 4.5 7.1 6.1 5.7 6.0 5.6
Iceland .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Ireland .. .. 1.6 1.6 1.8 2.0 2.2 2.2 2.2 3.2 2.6 2.1 1.8 1.4
Israel .. .. 19.2 27.8 16.1 13.1 11.3 11.2 11.6 21.3 8.7 7.1 9.4 ..
Italy 1.8 1.8 2.3 3.1 2.9 3.0 2.8 2.9 3.9 8.2 7.6 9.6 13.0 13.0
Japan 17.5 19.9 21.3 24.9 15.0 13.9 8.8 9.3 11.1 14.6 11.9 11.6 11.9 ..
Korea .. .. .. 19.9 19.1 17.9 13.0 14.5 13.8 19.5 13.4 12.2 14.0 12.9
Luxembourg .. .. .. .. .. .. .. 0.7 0.7 0.7 0.5 0.4 0.7 0.7
Mexico 8.5 8.5 7.6 6.6 5.7 4.3 4.1 3.5 3.2 3.2 3.0 .. .. ..
Netherlands 2.7 2.6 2.9 3.5 3.5 3.7 3.7 3.3 3.4 3.6 2.9 2.8 2.7 2.6
New Zealand .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Norway 7.9 8.2 9.2 10.0 9.3 7.9 7.2 6.4 6.4 11.4 8.0 6.7 7.4 6.8
Poland 6.0 7.0 6.1 5.0 5.1 3.9 3.4 2.8 2.7 5.0 4.4 3.9 4.6 4.0
Portugal 3.7 4.1 4.2 4.6 3.9 3.6 3.5 3.3 3.6 4.5 4.4 5.3 6.1 5.5
Slovak Republic 21.3 21.0 22.6 20.1 15.7 13.6 16.4 13.4 11.1 13.0 13.1 11.9 12.3 11.8
Slovenia .. .. 5.5 5.7 5.4 5.2 5.8 5.1 4.6 6.8 6.6 6.3 7.0 6.9
Spain 2.9 3.2 3.6 4.5 4.3 4.3 4.6 4.8 5.9 9.4 8.3 9.6 9.9 10.2
Sweden 3.1 3.0 3.3 4.2 3.4 3.4 3.2 3.0 3.4 5.7 4.1 3.6 4.1 3.7
Switzerland 3.3 2.9 3.2 3.9 3.5 3.2 3.1 2.6 2.8 3.0 2.6 2.6 2.8 ..
Turkey .. .. .. .. .. .. .. .. .. .. 3.7 3.4 5.3 4.4
United Kingdom 6.0 6.0 6.6 8.1 7.8 7.9 8.0 7.7 8.6 11.3 8.3 7.7 8.5 8.0
United States 2.6 2.6 2.7 3.1 2.9 2.8 2.7 2.5 2.6 3.4 2.8 2.7 2.8 2.5
Euro area .. .. .. .. .. .. .. .. .. .. .. .. .. ..
OECD-Total .. .. .. .. .. .. .. .. .. .. .. .. .. ..
China .. .. .. .. .. .. .. .. .. .. .. .. .. ..
India .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Indonesia .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Russian Federation .. .. .. .. .. .. .. .. .. .. .. .. .. ..
South Africa .. .. .. .. .. .. .. .. .. .. .. .. .. ..

1 2 http://dx.doi.org/10.1787/888933002699

Figure 32.1. Financial corporations debt

Ratio of debt to equity, number of times, 2006 and 2011

2006 2011

31
20
18
16
14
12
10
8
6
4
2
0

1 2 http://dx.doi.org/10.1787/888933001749

NATIONAL ACCOUNTS AT A GLANCE 2014 © OECD 2014 111

 From:
National Accounts at a Glance 2014

Access the complete publication at:

https://doi.org/10.1787/na_glance-2014-en

Please cite this chapter as:

OECD (2014), “Debt to equity ratio in financial corporations”, in National Accounts at a Glance 2014, OECD
Publishing, Paris.

DOI: https://doi.org/10.1787/na_glance-2014-35-en

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any
territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Extracts from
publications may be subject to additional disclaimers, which are set out in the complete version of the publication, available at
the link provided.

The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at
http://www.oecd.org/termsandconditions.